Household consequences for insurance premium spike

New research has shown nearly half of Australian households will cut expenses and 42% will switch policies to afford the hike in health insurance premiums.

On 23 December, the Government announced an average 6.2% hike in the cost of private health insurance premiums from 1 April 2014.

According to a survey by insurance price comparison website Comparethemarket.com.au, many households were taken off-guard by the price rise – which can be as much as an additional $150 per annum onto each premium.

The survey of 1000 Australians showed 47% of households intend to cut back on household expenses to afford the upcoming increase in premiums and nearly 42% will shop around for a new policy.

Of the respondents surveyed, 87% are eligible for the full Australian Government rebate and 62% currently have private health insurance.

When asked how they felt about the price hike, 54% of the full respondent pool said they were ‘angry’ or ‘annoyed’.

Among those with private health insurance, just over half felt the cost of private health insurance would no longer be worthwhile, 47% said they would need to cut other household expenses to afford the new premiums, and 42% said they would shop around for another policy.

Only 10% said they would let their policies lapse.

With premiums increasing from every health fund, now is not the time to be complacent about health insurance costs, Comparethemarket spokesman Grant Waldeck said.

“Where previously some Australians may have been comfortable with their health insurance, the survey reveals that now many have become uncomfortable with the cost to their household budget.”

Australians must consider a number of factors when assessing their existing policies or shopping around for another, Waldeck said.

“We recommend Australians assess the services their policies provide – particularly the extras. Up until now, some Australians were happy with a more comprehensive policy that afforded them some ancillary ‘luxury’ services – many will now look to compare policies and trim the fat off extras they no longer need.”

There are many policies that offer exceptional value, said Waldeck.

“The more you understand how to use your policy, the better you will be at finding savings.”